Foreclosures hit lowest level since '06

Foreclosures and mortgage defaults fell during the first half of the year to their lowest levels since 2006, show figures released Tuesday from real estate tracker DataQuick.

The declines come at a time when the county's home prices have risen to a 5½-year high and mortgage professionals are adjusting to a California law that protects homeowners from potential foreclosure abuses.

Foreclosures totaled 1,489 during the first six months of the year. That's the the lowest half-year tally for the county since 2006, when 445 foreclosures were counted.

Nearly 3,500 mortgage defaults were filed from January to June. That marks the lowest level of defaults since 2006, when more than 3,300 were recorded.

On a monthly basis, foreclosures are down as well. They dropped 13 percent to 152 in June from the month before. Notices of default in June totaled 654, up 2 percent from the previous month but down 55 percent from the same time a year ago.

Why is housing distress trending downward in San Diego County and throughout Southern California?

It comes down to simple math, said DataQuick president John Walsh in this quarter's foreclosure report. Rising home prices -- which have risen by double-digit percentages in the county -- mean fewer property owners are underwater on their mortgages, he said.

"At this point in the cycle, it’s fairly straightforward to see what’s going on," he said. "Just do the math – it’s not calculus, it’s 4th grade arithmetic. A foreclosure only makes sense when the home is worth less than what is owed on it."

The introduction of the Homeowner Bill of Rights also helps explain the sharp drop in foreclosures and defaults in the early part of the year, Walsh said. The new set of laws, which became effective Jan. 1, prevents lenders from starting the foreclosure process while a loan modification has been submitted or being reviewed, among other functions.

"In California and other states in recent years foreclosure activity has sometimes plunged temporarily after a new law kicks in and the industry takes time to adjust," Walsh said.

Statewide, defaulted mortgages stem mainly from 2005 to 2007, when loan-qualification standards were weak, DataQuick said. Late 2006 marks the median origination period for troubled mortgages.

Property owners in the state were behind a median of nearly eight months on their primary home loans when their banks initiated the foreclosure process. They owed $16,155 on a $312,000 mortgage, both medians for the state.

Californians who took out home equity loans and lines of credit and defaulted owned a median $5,307 on a median $68,332 credit line.